The Fed is the lender of last resort. When a solid bank runs short of cash, the Fed can lend against good collateral.

The oldest tool for this is the discount window.

It works only if banks are willing to use it, and that is the catch.

After the 2023 bank failures, the Fed set up a special program to lend against bonds at full value.

That program, the BTFP, made its last loan repayment on March 11, 2025.

With it gone, banks lean again on the discount window.

The Fed has urged banks to pre-position collateral and test the window before trouble.

It also runs a standing repo facility as a second backstop.

A healthy bank can hit a cash crunch if depositors leave fast.

It may hold good bonds, but selling them in a panic locks in losses.

The discount window lets the bank borrow against those bonds instead of selling.

The bank posts collateral, takes cash, and repays when calm returns.

The standing repo facility does the same for Treasuries, at a set rate.

Together they turn good but frozen assets into ready cash.

The first stress point is stigma. Banks fear that using the window signals weakness.

So they wait too long, and a cash crunch becomes a failure.

That is part of what sank Silicon Valley Bank in 2023.

The second is collateral. A bank must have it pre-positioned to borrow fast.

The third is speed. Digital runs move in hours, faster than paperwork.

The backstop is powerful. A bank with good collateral and access should not fail for lack of cash.

That safety net is real and deserves credit.

What can break is a bank that has not prepared, or that waits out of fear until it is too late.

You can watch the use. The Fed reports discount window and repo facility borrowing each week.

A jump in borrowing shows banks are reaching for the backstop.

The discount window is the Fed's oldest safety net, strong on paper but weakened by stigma.

With the 2023 program gone, using and testing the window matters more than ever.

The next test is the next deposit scare. Watch weekly discount window and repo facility borrowing.